What Does the 2024 Autumn Budget Mean for Tax in Project Finance?

By Morag Loader, Director of Accounting and Tax.

The new Chancellor of the Exchequer, Rachel Reeves, delivered her first Autumn Budget. Full details of the Autumn Budget 2024 measures can be found at www.gov.uk/government/topical-events/autumn-budget-2024.

There were fewer changes to corporate taxation than many had predicted ahead of the Autumn Budget. Some of the measures affecting companies in the project finance arena are summarised below.

Corporation Tax 

The Chancellor committed to maintaining the main rate of corporation tax at 25%, the lowest rate in the G7, for the duration of this parliament. 

Corporate Tax Roadmap 

The Government has produced a Corporate Tax Roadmap consultation document. It will consult on 3 areas of international taxation namely transfer pricing, permanent establishment and the diverted profits tax. Medium sized companies are likely to be brought within the transfer pricing rules.  

The Government will also consult on a mechanism for providing investors in major projects with greater tax certainty in advance, and will consult on the tax treatment of pre-development costs. The Corporate Tax Roadmap includes a commitment to maintain the small profits rate and marginal relief at current rates and thresholds, and to maintain key features of the current corporation tax regime such as Full Expensing, the Annual Investment Allowance, R&D relief rates, and the Patent Box.

Capital Allowances

The 100% first year allowances for zero-emission cars and electric vehicle charging points will be extended until 31 March 2026. Claiming these allowances  is not right for every business as the interaction with the UK’s loss relief rules means that some businesses will be better off with writing down allowances, taking relief more steadily rather than front loading tax relief. 

Freeports and Investment Zones

The Government has confirmed that it will continue with the freeports and investment zones programmes. 

Energy Profits Levy (EPL) 

The EPL affects oil and gas companies that operate in the UK or on the UK Continental Shelf and is designed to support the transition to clean energy.  

It will rise by 3% to 38% from 1 November 2024 and will now continue until 31 March 2030, an extension of a further year. To provide certainty and to support a stable energy transition, 100% first-year allowances in the EPL will remain and the Government will consult in early 2025 on how the oil and gas tax regime should respond to price shocks once the EPL ends in 2030.

The EPL has two investment allowances:

• the 29% Investment Allowance
• the 80% Decarbonisation Investment Allowance

The Investment Allowance is removed in the Autumn Budget and the Decarbonisation Investment Allowance will be reduced to 66%. 

Tax Relief for Payments into a Carbon Capture and Decommissioning Fund

The Government is committed to the creation of a UK Carbon Capture Usage and Storage Industry to help the UK achieve its net zero targets. New legislation will give tax relief for payments into a decommissioning fund as if it had been spent on actual decommissioning expenditure. This measure removes a tax barrier which oil and gas companies have indicated would prevent the transfer and repurposing of suitable assets in oil and gas, such as pipelines and platforms, for use in carbon capture usage and storage. Using repurposed oil and gas assets is a much cheaper and more sustainable alternative than building new assets.  

The measure will treat qualifying payments into a decommissioning fund as though those payments were incurred on actual decommissioning and therefore qualified for tax relief. This legislation will also remove receipts from the sale of these assets from the scope of the EPL.

Pillar 2: Adoption of the Undertaxed Profits Rule 

This measure affects groups with annual global revenues exceeding 750 million euros that have business activities in the UK and is part of the UK Government’s commitment to implement the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on base erosion and profit shifting.  

As part of the UK’s multinational top-up tax, the undertaxed profits rule has been adopted. This means that any top-up taxes not paid under another jurisdiction’s Pillar 2 rules are brought into charge in the UK. The charge would arise where the group’s profits in another jurisdiction are below the effective tax rate of 15%. The top-up is designed to bring the effective tax rate up to 15%. 

Carbon Border Adjustment Mechanism (CBAM)

As previously announced, the Government will introduce this new environmental tax from 1 January 2027.  

The CBAM will place a carbon price on goods at risk of carbon leakage imported into the UK from the aluminium, cement, fertiliser, hydrogen, iron and steel sectors. 

Landfill Tax Rates

The increase in landfill tax rates was confirmed. From 1 April 2025 the standard rate of landfill tax will increase to £126.15 per tonne and the lower rate will increase to £4.05 per tonne.

Stamp Duty Land Tax (SDLT)

This measure increases the rate of SDLT on purchases of residential properties by companies to 5% (previously 3%) above the standard residential rates of SDLT. It also increases the single rate of SDLT payable by companies when purchasing residential properties worth more than £500,000 from 15% to 17%. 

Our View

The Chancellor emphasised her aim of “growth, growth, growth” for the UK economy, as well as her desire to fix public services. The Chancellor’s tax focus was primarily on the impact on individuals of any tax measures she introduced. The Autumn Budget 2024 sees the second biggest increase in taxes in UK history with much coming from the increase in employers’ National Insurance contributions. However, the Autumn Budget as a whole aims to raise some money from a variety of sources to spread the burden as broadly as possible while keeping an eye on Labour’s manifesto promises. We will wait to see whether the Chancellor’s calculations will bear the fruit she expects.